Invest with your head, not your heart

Invest with your head, not your heart

Property can be one of the most stable methods of investing today. Unlike the turmoil of the stock market, property can be a consistent way for people to extend their wealth ratio. However, many new investors make the mistake of investing with their heart instead of their head. An old cliché reminds us that “You make your money in property when you BUY, not when you SELL.” With that in mind, it is important that we make good BUYING decisions in everything, especially with property.

And it’s your mind that must be ready to play the game. If you invest with your heart, you will make decisions based on what you feel. Soon, what you feel will get you into investments that you should never have considered.

It’s a known fact that if you can repeat an activity for 18 or more consecutive days, you have a new habit in the making. So try these few exercises (or create a few of your own) for the next 18 days to jumpstart a new level of operating:

1.Go home a different way every day and see all the potential opportunities that exist around you

2.Exercise an hour earlier in the morning and learn a different exercise that will work a different part of your body every other day

3.Go to the grocery store and reverse the path you typically take through the store

4.Mail your letters at a different post office than the one you normally use

5.Generate multiple solutions as a way to resolve daily issues

6.Learn one new idea or concept every day to increase your creativity

Now, fast forward this mental process to real estate investing.

When we first began studying the markets and actively looking for investment opportunities, we looked at everything. We really had not (yet) totally grasped the idea that (more often than not) deals are made, not born. So we analysed every deal that was presented to us. At that time, it did two things for us: (1) We got used to looking at multiple deals everyday and analysing how we could make them work for us (extending our analysis comfort zone to process information quicker) and (2) we practiced using our minds (not our hearts) to create as many ways as we could to get into the deal. Our deal acceptance ratio today is significantly higher than when we first began.

By the end of that first year in business, we were better at pricing and getting into deals. It wasn’t until we knew we needed to generate cash and cash flow that we realised that we had not practiced exploring all the various exit strategies – whether we needed to employ them or not. This is even more important than the entry into a deal, because how you exit will fundamentally determine how you will enter a deal. When we made this connection, an entirely new world of thinking opened up to us. That’s when we knew our mind was expanding – and our emotions were being managed.

Decisions of the head vs. Decisions of the Heart
The key to knowing and making decisions of the head is to know yourself and your tolerances. Many of us don’t spend enough time to get to know ourselves. Believe it or not, not knowing yourself will lead to many a ‘heart’ decision because you will ultimately do what feels right to do, even if your head is telling you to go the other way.

Take a look at the following examples to see where you fit…

A head decision will tell you to investigate all the possible avenues to maximise your opportunity.

A heart decision will compel you to ask what other people think about your opportunity – regardless of the fact that it’s ultimately your decision. (This can be a very dangerous place to be because chances are you’ve already made up your mind and anyone who invalidates your decision or thinking is somehow attacking you. (Your heart can be attacked but your mind can be challenged.)

A head decision will tell you the numbers surrounding a deal do not really produce your desired result.

A heart decision will tell you to go ahead with your deal and the numbers ‘will work themselves out.’

A head decision will tell you that profit is written all over the deal.

A heart decision will tell you that you need to “up” your offer because this is really the deal of a lifetime and you do not want it to slip away.

A savvy investor will be able to marry both head and heart decisions to logical and sound next actions. You can’t become a savvy investor if you read all the books in the world on investing and never do a single deal. Lessons can’t be learned if you fail to extend yourself beyond your comfort zone. Why? Because what you do should always push the boundaries of your comfort zone, which incidentally, is based on emotions.

Wisdom doesn’t come by osmosis but rather by studying and actively applying what you’ve learned everyday and surrounding yourself with people who are doing what you ultimately want to do. This may occur by changing the people with whom you currently associate so that you are in an environment conducive to change and expansion.

Remember, you have to continually challenge yourself to win the ‘mind over what really matters’ game everyday. Enjoy learning and wisdom will follow.